October 6, 2013

Last week, Instagram posted an announcement on their company profile that they're going to start slowly rolling out ads in the United States. When Instagram dipped its toe in the monetization waters last December, the backlash was aggressive, so this company definitely understands that ads are a sensitive topic.

Full disclosure: I'm a heavy Instagram user. I love the service, and I use it daily. I appreciate the beauty and the authenticity of the product, and I don't want to see it sullied by slapdash attempts to monetize. With that in mind, I have to say, I couldn't have asked for a better announcement.

Everything about this post indicates that the Instagram team "gets" it. I've taken the liberty to highlight the parts that illustrate this best, but it really is worth a read to see that their plan for ads on Instagram is thoughtful and more considerate toward users than almost any other platform.

Click to zoom

Within seconds, the post received a flood of vicious and obscene comments.

Comments on Instagram's 10.3.13 post announcing the roll-out of ads.

Over the weekend, they continued to pour in.

Comments on Instagram's 10.3.13 post announcing the roll-out of ads.

I know I shouldn't be surprised. There's always backlash whenever a consumer technology company changes anything, and ads are a particularly touchy topic. But I was truly appalled by the reaction. These comments aren't light criticisms suggesting a different path to profitability. They're scathing attacks against a company that has provided us with an excellent service for three years.

What surprised me most was how ignorant people are about how the internet works. Do they think Instagram is a charity or some kind of subsidized government program? How do they think Instagram pays for the servers that securely store all their photos in the cloud? Do they think Instagram's employees are all volunteers? Are they so indignant as to think they deserve this service for free?

You can't get something for nothing. That's just not how economics works. And I'm saying this as someone from the Napster generation. I grew up on file-sharing, CD-ripping, and bootleg everything, so it's not that I don't understand the hunger for free content. It's just that I grew up enough to know that people who make things are people, too. They have rent to pay and groceries to buy, just like the rest of us.

So I understand that people who make things -- whether those things are sandwiches or songs or beautiful mobile apps -- deserve to be compensated. Sometimes I pay them directly, like when I buy a slice of pizza or pay for my monthly Netflix subscription. But most of the time, at least for digital products and services, someone else pays on my behalf. That is, I'm exposed to ads that allow me to have my content without paying for it myself.

This seems obvious when it's explained, but we in the tech industry do a really terrible job letting people know that this is how our businesses work. We ought to be direct and say, "Content isn't free. We all have to pay, either with dollars or with eyeballs." But we don't say that. Instead, we use veiled language and jargon like "freemium," and so we can't be surprised if the average person has no idea how our businesses work.

One of the clearest examples of the general public's ignorance about how internet companies make money came from @taylorhindman, an apparent 16-year-old from Indiana. She left the following comments on Instagram's post about rolling out ads:

Comments on Instagram's 10.3.13 post announcing the roll-out of ads.

Taylor's just a teenager, so we can't be too hard on her, but I think it's worthwhile to address her arguments because they represent those of so many others. When Taylor says, "You have enough money," what exactly does she mean? Last time I checked, Instagram has no revenue, so she certainly can't be referring to the company's current income stream. Maybe she's talking about the $715 million Facebook shelled out to acquire the start-up in 2012. But where does she think that money came from? 88% of Facebook's revenue comes from ads.

Also, I can't help but point out that her financial predictions ("Doing this is going to lower stocks") didn't quite pan out. Turns out, the folks on Wall Street understand how a business works, and Facebook's stock was up 3.78% on Friday after the announcement, which is pretty much an all-time high for the company's stock price.

Facebook stock price Oct 3-4, 2013 (Source: Google Finance)

One last note on the Instagram ads brouhaha: exposing users to ads isn't the only way Instagram can make money, and criticisms that center on this point are certainly valid. Other potential sources of revenue could include user subscriptions, paid upgrades to premium features, fees charged to businesses for access to brand support, or revenues from selling user data. Given the backlash Instagram faced last year when it hinted that ads may be to come, it's safe to say the Instagram team probably explored all of its non-ad options before settling on the plan it announced on Thursday.

Although I'd personally be willing to pay for access to the Instagram service, I understand that keeping the service free to users is a big part of what's fueled its growth. The openness and democratization of information that a free global platform like Instagram empowers is dependent on it being accessible everywhere. If the occasional beautiful, high-quality photo or video from a brand can make that happen, maybe that's not such a bad thing after all.